Some troubling news has come through the wire for those who enjoy using OnLive on their Android devices. Many different outlets are receiving reports from OnLive employees regarding some recent changes.

The commonality of all these reports is that a ton of people are being laid off. Some are saying that the entire staff, with the possible exception of a few high-level executives, are being laid off.

A mass exodus like this is usually accompanied by news that a company is shuttering its doors, but that doesn’t seem to be the case here. Brian Fargo reportedly received this email from an employee:

I wanted to send a note that by the end of the day today, OnLive as an entity will no longer exist. Unfortunately, my job and everyone else’s was included. A new company will be formed and the management of the company will be in contact with you about the current initiatives in place, including the titles that will remain on the service.

It has been an absolute pleasure working with you and I’m sure our path with cross again.

But that email has since been recalled (in other words, they want to take it back as if it was never sent). Other reports are suggesting that isn’t entirely true, and that OnLive will remain a running, functional company despite getting rid of most of its staff.

So what exactly is going on over at OnLive? A rep naturally reminded inquirers that rumors and speculation are not responded to, and they expressly mentioned that OnLive will continue to exist. And it would have to, right? They can’t just close up shop one day with the fate of tons of customers’ purchases in hand. And let’s not forget the deals OnLive has in place with VIZIO, OUYA, and the likes.

The wrinkle comes into play with a rumored bankruptcy beginning to take place. Kotaku claims to have heard from a source that the company is preparing to file for bankruptcy. These two reports naturally fit as OnLive’s rumored layoffs would be a strong indication that the company is losing money.

But what if this were less about cutting costs (because you don’t cut costs by shafting your entire staff)? One possibility is that OnLive sought to be acquired by another company in the face of debt. It wouldn’t make sense for the acquiring company to let all of the staff go in this situation, though — unless, of course, the acquisition is coming from a competitor.

I could easily see Gaikai having swooped in and swallowed OnLive up in times of financial danger. With Sony acquiring Gaikai they definitely don’t have a shortage of capital to play with, and it would be better for Gaikai to nuke the competition before Sony’s gaming competitors — Nintendo and Microsoft — have a chance to rival what they’re about to bring to the Playstation brand.

But with so many uncertainties in these stories we simply can’t say for sure what’s going on. All we know is that something bad is going on at OnLive, and employees seem to be getting those unfortunately farewell letters without an accurate account of what, exactly, is about to take place. What do you think? [via Kotaku, The Verge, Mashable]